U.S. equities posted their second consecutive intraday rebound Thursday, bouncing back from losses in the early going.
The catalyst for the recovery was another day of problems in the bond market with an auction of U.S. Treasury bonds were delayed — sending traders into stocks as yields rose and T-bond prices fell.
In the end, the Dow Jones Industrial Average gained 1.3% to break over its 50-day moving average for the first time since December, the S&P 500 wafted up 1.1%, the Nasdaq Composite finished the day 0.9% higher and the Russell 2000 ended Thursday with a 0.9% gain.
Treasury bonds ended the day higher (albeit off their highs), the dollar was little changed, gold was slightly weaker, and oil moved higher on news of a number of major producers would hold a meeting in March to discussed a proposed supply freeze.
Venezuelan oil minister Eulogio Del Pino said his country, Saudi Arabia, Russia, and Qatar will attend.
This is critical as the supply situation at the Cushing transfer hub worsens, with Genscape data showing stockpiles rose to move than 67 million barrels last week vs. the 73 million barrel estimates storage capacity of the facility. West Texas Intermediate gained 2.8% to finish at $33.07 a barrel.
Financial stocks led the way higher with a 1.4% gain followed by technology, with a 1.3% gain. Energy, surprisingly, were the laggards with just a 0.2% gain.
LendingTree Inc (NASDAQ:TREE) gained 22.3% after reporting a Q4 earnings beat and issuing strong Q1 guidance. Halliburton Company (NYSE:HAL) climbed back into the green after announcing it would cut 8% of its workforce. Anadarko Petroleum Corporation (NYSE:APC) gained 4% after announcing it had monetized $1.3 billion in assets (vs. the $1 billion target previously announced).
High-end furnishings retailer Restoration Hardware Holdings Inc (NYSE:RH) lost 25.9% after issuing a negative earnings preannouncement. IMAX (IMAX) fell 11.4% after reporting mixed Q4 results as higher capital expenditures weigh on profitability. And HP Inc (NYSE:HPQ) fell 4.4% after free cash flows missed big and analysts worry if the company is too optimistic given PC and printing weakness.
On the economic front, headline durable goods orders increased 4.9% in January beating the consensus estimate of a 2.5% gain. The number was boosted by a 54.2% jump in civilian aircraft orders.
Stepping back, there seems to be positive momentum building on two critical fronts: Crude oil and the specter of further interest rates hikes from the Federal Reserve this year.
On the former, amid much back and forth between OPEC and non-OPEC producers as they jockey for position ahead of a possible output freeze deal, Russia’s energy minister said Iran might need special treatment (since it is ramping up to pre-sanctions levels) while Qatar’s energy minister and former OPEC President said a freeze agreement could send oil prices back above the $50-a-barrel level within a year.
On the latter, St. Louis Fed President James Bullard (who has a record of reversing stock market dives with well-timed opining) said the case for raising rates was losing urgency and that the Fed and markets are not on the same page when it comes to the outlook on rates. The Fed is still official expecting four quarter-point rate hikes this year; while the futures market doesn’t expect any further action until 2017.
A continuation of these two trends should continue to sustain what looks like the best uptrend initiation in stocks since October. Investors would do well to keep an eye on precious metals and materials stocks, which have been leading the market higher out of the January-February lows.
Stocks like First Majestic Silver Corp (NYSE:AG), which gained 5.5% for Edge subscribers today to bring its month-to-date gain to 35%. Or stocks like Mexican cement maker Cemex SAB de CV (ADR) (NYSE:CX) which gained 1.9% to bring the March $5 calls recommended to Edge Pro subscribers to a gain of 36% since recommended on Feb. 18.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
